Privacy Worries Plague E-Biz

Online shoppers are concerned about disclosing their personal information but most would give up the data for a chance at winning some cash.

E-businesses that want to succeed better step up their privacy and security efforts. Jupiter Media Metrix is reporting that these issues could potentially cost e-businesses almost $25 billion by 2006 - up from $5.5 billion in 2001.

"Neither consumers nor businesses effectively address online privacy issues," said Rob Leathern, Jupiter Research analyst. "In this increasingly complex world, even legitimate businesses will suffer when consumers' perceptions of the control and safety of their personal information online are damaged. Companies should clearly and pervasively communicate their data gathering and use policies to make trade-offs between information and benefits increasingly clear to consumers."

The information comes as a result of a March 2002 Jupiter Consumer Survey of 2,097 randomly selected online consumers in the United States. Other significant findings of the research include:

While seven-in-ten consumers express concern about online privacy, only four-in-ten bother to read privacy statements before submitting their personal information.

82 percent of online consumers are willing to provide various forms of information to shopping Web sites (where they have not yet made purchases) in exchange for something as modest as a $100 sweepstakes entry.

36 percent of users would provide a username and password to this site - a potential concern considering that other Jupiter data indicate that 53 percent of online consumers use the same username and password wherever they go online.

A majority of consumers seem willing to give their personal information for small benefits because it is not always clear how their information will be used or how widely it will be shared, and the extent of this behavior varies greatly among different brands, Web sites and applications.

Jupiter believes that online retail sales would be approximately 24 percent higher in 2006 if consumers' fears about privacy and security were effectively addressed. With poor online privacy practices, many companies will experience negative effects not only on their online sales over the next several years, but also in off-line sales that shift to more privacy- sensitive competitors.

"Early promises of privacy self-regulation by interactive firms have not materialized, and the industry has ceded the initiative to legislators. Only immediate widespread industry commitment to privacy best practices will limit further restrictive government regulation," Leathern said.

Jupiter analysts advise companies to allocate dollars for consumer security and privacy education and to treat online privacy like a strategic marketing initiative, rather than a compliance burden.

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